Apple has done a great job in marketing its 'free' upgrades. But nothing is truly free

InfoWorld|Oct 30, 2013

There's a lot of talk today that operating systems want to be free, perhaps thanks mainly to Apple's marketing of its free upgrade to its latest versons of OS X, iLife, and iWork. InfoWorld's Paul Venezia recently wrote, "Relying on income generated by selling an operating system of any type is becoming a fool's game, and woe be unto them who miss the signs." Give the OS away, just like Apple is supposedly doing. Eliminate the OS as a for-cost item. Make your money from the hardware and services.

Microsoft has been thinking this way, too. In July, in a letter to all Microsoft employees, CEO Steve Ballmer wrote, "the form and delivery of our value will shift to devices and services versus packaged software." Consider the Surface tablet: You purchase the device with its Windows RT OS and Office 2013 included. Consider the Xbox: You purchase the game system complete with its operating system. Mobile devices too: You purchase the device with an OS already on it. There's no extra cost in any of those cases.

Still, I'm baffled as to why people think the OS should be free. Because Apple is perceived as giving away its software for free? Sorry, but you are paying for that OS. It's part of the hardware cost, just as it is when you buy a new PC. Yes, the OS X Mavericks upgrade is free, but so is Microsoft's Windows 8.1 upgrade. Yes, Apple is making more upgrades free of charge to more previous OS X versions than Microsoft is doing for Windows users. But that's a matter of degree, based on the fact its business isn't based on software sales but on hardware and service sales.

Apple is making a lot of hay on its free upgrades, overstating the case in an effective PR move. At the Apple event last week Mac chief Craig Federighi said "the days of spending hundreds of dollars to get the most from your computer are gone." Ha! At the same event, Apple announced the $2,999 Mac Pro. Thank goodness we aren't paying for the OS or iWork, because that would really hurt! Come on, people! Let's not be naive about things being "free."

Giving away iWork is a sign of desperation for Apple, though giving away something nobody wants or uses in the enterprise could be a brilliant move -- it may shift some people from Office if they find they can do what they want with the free iWork on their Macs. On the other hand, Apple reduced the feature set in OS X's iWork to be compatible with its less-capable iOS and Web versions, so perhaps "brilliant" is an overstatement.

Microsoft is not (yet) a hardware-and-software company the way Apple is, so it can't give away Windows 8 to XP and Vista users as Apple can give Mavericks to Lion and Mountain Lion users -- and never mind that Mavericks is a minor upgrade to those OSes, whereas Windows 8 is a huge shift. Microsoft certainly cannot give away Office, a core business for it, as Apple can give away iWork, a minor business for it. Yet Microsoft is basically on the same page as Apple for the long term, as Ballmer said and as the free Windows 8.1 upgrade and inclusion of Office on Windows RT systems show.

Remember, something has to pay for the development costs, and whether that cost is buried in hardware or spread across hardware, software, and services doesn't really matter at the end of the day. You'll pay the same for it however it is allocated.

It's likely that Windows and Office will end up being free because they'll be offered as an Office 365 subscription, where their cost is included in the subscription. The new game is to treat software as a subscription -- Windows, Office, Xbox, Exchange, SharePoint, and Lync -- rather than as a discrete purchase. That's how we will see a world where Windows is "free."